How Does A Buy Here Pay Here Work?

Posted Thursday, May 23, 2024

As the prices of new vehicles are over $47,000 and used cars around $20,0000, buying a car requires a significant financial investment; to make the process affordable, many drivers choose an auto loan to finance their vehicle, where you can pay for the car in monthly installments rather than a single large payment.

However, it will be very difficult to secure an auto loan if you have a poor or low credit score, and if somehow you get one, you might have to pay a higher down payment or may be charged with excessive interest rates.

Buy Here Pay Here financing is an excellent alternative financing solution that some used car dealerships like Honest Autos offer to people who cannot qualify for an auto loan through traditional lenders.

The main difference? With BHPH financing you make monthly car payments directly to the dealership instead of banks or credit lenders.

Continue reading to learn more about Buy-Here, Pay-Here Financing, what it is, how it works, and its potential benefits and drawbacks.

How Does Buy Here Pay Here Work?

Traditional car dealerships rely on third-party auto loan lenders to provide vehicle financing, and if you are denied a loan, you might not be able to buy a car, which means these dealerships sell the cars but do not fund the loans.

This is not the case with BHPH dealerships, where you can secure a car loan and make payments directly to the dealership, so it acts like both the dealer and the financing company.

As a result, Buy-Here-Pay-Here dealerships can provide loans to buyers from almost all backgrounds, regardless of your credit score. They might not even check your credit history as they are more interested in stability than an arbitrary credit score. As long as you can prove that you earn enough money to afford car payments, you can be financed at a BHPH dealership.

The majority of cars available on a buy-here-pay-here lot might be slightly older vehicles with some mileage on them in order to keep the cost of the vehicle low. This helps keep the payment at an affordable level.

Buy-Here-Pay-Here customers should also be aware that their vehicle is likely to have GPS so the dealer can locate the vehicle and possibly repossess it if you miss a payment, and in some cases, dealers may even equip cars with a "kill switch" that can remotely disable the vehicle when payment is due. Honest Autos does not use starter-interrupt devices (kill switch) but it is a common practice in the industry.

To begin, you can visit a buy-here-pay-here dealership and explore the cars they have available; once you find a vehicle that suits your needs and fits your budget, you can apply for financing.

Since many dealerships do not check credit scores and are willing to approve customers with poor credit, you have a higher chance of getting a car loan for the vehicle you choose. Additionally, they may offer incentives such as no down payment or zero interest for the initial six months.

Steps Involved in the BHPH Process

Now, let's discuss the buy-here-pay-here loan process in detail:

1. Vehicle Selection and Application Approval

Starting the BHPH loan process involves filling out an application on our website and waiting for approval, which usually requires important personal information, employment details, and proof of income. These dealerships understand the need for auto loans with poor credit customers and are more flexible regarding credit history.

The approval process is typically quick, and you might even receive a response on the same day. The dealership considers your ability to make monthly payments instead of relying on your credit score. This makes it more convenient for individuals with less-than-perfect credit to get loan approval.

After approval of your application, a buyer can proceed with selecting a vehicle from the dealership's car lot.

2. Make a Down Payment and Agree on an Interest Rate

As part of the BHPH loan process, you'll make a down payment and agree on an interest rate. The down payment minimizes the dealership's risk and verifies your ownership of the vehicle. The amount of the down payment can differ based on the dealership and the car's price.

Interest rates for BHPH loans are typically higher than traditional loans because these dealerships are willing to work with individuals with poor credit or no credit history, which is riskier for them.

3. Payment Structure

When getting a BHPH loan, it is important to carefully consider the repayment terms and payment structure. Buy here, pay here dealerships provide the flexibility to customize loan terms according to your financial situation, which means you can negotiate the duration of the loan and the payment amount that fits your budget. Unlike conventional lenders, BHPH dealerships are often more tolerant regarding credit history and may not even require a credit check.

However, carefully examine the loan terms before committing to any agreement, and understand the interest rate, fees, and consequences for late or missed payments. The payment structure usually requires weekly or bi-weekly payments directly at the dealership, which can be helpful for individuals who prefer in-person payment.

Advantages of Buy Here Pay Here Dealerships

Buy here, pay here financing is a sensible option for individuals with poor or no credit. It is also worth considering if you wish to avoid a credit report inquiry or require a small loan for a short duration. Here are a few advantages of buy here, pay here dealerships.

1. They Don’t Care About Credit History

The main advantage of Buy Here, Pay Here is that the dealership is not concerned with your credit history or score, so you won't face a loan denial due to insufficient credit history or a low credit score.

As long as you can provide evidence of income, residence, and a valid identification, you can get financing for your desired vehicle. Buy here, pay here dealerships offer a selection of affordable used cars, as well as a range of newer and more luxurious vehicles.

2. Getting a Car is Easier

When dealing with traditional dealerships, completing the loan application process can be time-consuming, especially if you have poor credit. On the other hand, getting financing from a dealership makes the car-buying process relatively easy and quick.

Buy-here-pay-here (BHPH) dealerships provide a convenient location where buyers can find a desired vehicle. Honest Autos prices their vehicle based on fair market values and online pricing so you don’t feel the need to negotiate down off of a sky high price.

3. Minimum Downpayment Required

Many buy-here, pay-here loans typically have minimal or no down payment requirements. If you want to purchase your dream car but lack the resources, buy-here, pay-here financing can be a convenient option. However, the loan amount you pay will depend on factors such as your income, the vehicle you choose, and the loan duration.Buy here pay here’s are a Great Way to Rebuild Your Credit if the dealership reports payment history to the credit bureaus.

Buy here, pay here financing is an opportunity to rebuild your credit if you can find a reliable dealership. Although not all dealerships report your credit history, an honest and sizable dealership will report your payments to a credit reporting agency. This reporting of payments positively impacts your credit score, resulting in lower interest rates in the future. Make sure to ask the dealer if they report credit history and to whom they are reporting to.

Considerations and Potential Drawbacks

Before making a decision to pursue BHPH financing, it is important to be aware of the possible risks and drawbacks. Here are some factors to consider:

  • Higher Interest Rates

One major drawback of BHPH auto financing is high interest rates, which can result in higher overall costs.

  • Strict Payment Requirements

Traditional auto loan payments are made to the loan provider once a month. However, with buy-here, pay-here dealerships, it is expected to make weekly or bi-weekly payments. While this can be convenient for those who receive weekly paychecks, those who don't can face difficulties.

Honest Autos is Your Buy Here Pay Here Dealership in Florida

Buy here, pay here financing can be a great option for purchasing a car, particularly if you have less-than-ideal credit.

Honest Autos is your Buy Here Pay Here car dealership in Fruitland Park, Florida. We help our customers get financing to purchase reliable used cars from our extensive inventory, and provide affordable payment options to simplify your car buying process. Our wide selection of used vehicles includes sedans, hatchbacks, trucks, vans and SUVs. Visit our dealership today to get financing and find a vehicle that fits your needs and budget.